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Hensarling: Failed Regulatory State, Obamacare, Dodd-Frank Are Fiscal Policy Headwinds


Washington, February 15, 2017 - Financial Services Committee Chairman Jeb Hensarling (R-TX) delivered the following opening statement at today’s full committee hearing to receive the Monetary Policy and State of the Economy report from Federal Reserve Chair Janet Yellen:

After eight years of the largest monetary policy stimulus in our history and the most unconventional monetary policy in our history, Americans recently received disappointing economic news yet again. It is official: the economy grew at a measly 1.6 percent in 2016 when our historic norm is twice that.  That makes eight years of subpar growth, eight years of stagnant pay checks and eight years of unreplenished savings.

Notwithstanding good intentions at the Fed and not withstanding good personnel, after eight years there is zero evidence that zero interest rates and a bloated Fed balance sheet lead to a healthy economy.

What also hasn’t changed in eight years is that the Fed continues to unlawfully pay above market interest rates to some of the nation’s largest banks in order to prop up select credit markets. This very well could be fueling asset bubbles and is certainly harming the ability of market participants to accurately price risk.  This foray into fiscal policy clearly threatens the Fed’s monetary policy independence which should be preserved.

What also hasn’t changed in eight years is that, on the regulatory side, the Fed figuratively -- if not literally -- is taking up seats in bank board rooms. This means that unelected Washington bureaucrats can literally direct who gets credit in our society as opposed to competitive markets. I will continue to say it: we must be vigilant to ensure that our central bankers do not one day become our central planners.

Fortunately, there is something big has changed in the last eight years, and that is an intervening election and with it, the prospect of three new members of the Board of Governors. 

The National Federation of Independent Business reports that optimism on Main Street soared in the wake of the election, with the Small Business Optimism Index jumping up to a 12-year high.  Likewise, the number of Americans who say the nation is now on the right track has risen by 15 percent since the election.

Clearly, Americans have a newfound expectation that our economy will grow healthier with different policies coming out of Washington. 

I believe the last eight years have shown that no amount of monetary policy stimulus can make up for the fiscal policy headwinds of a cumbersome, failed regulatory state, an uncompetitive tax code, Obamacare and Dodd-Frank. 

All of these must be remedied and changed if we are to have a healthy economy for all and bank bailouts for none.

Building that healthier economy for all clearly requires changes at the Fed.  We must have a more predictable, disciplined and transparent monetary policy.

The Fed’s so-called “data dependent” monetary policy of today says nothing about which data matter, let alone how they matter.  This severely compromises the kind of policy transparency and predictability that is necessary for household wealth to grow and American companies to create jobs. 

Something else that has changed in the last eight years is the introduction of the reforms included in the Financial CHOICE Act which would begin to restore the Fed’s independence and promote economic growth. 

As several Nobel Prize winning economists, former Treasury secretaries and former senior economic policy officers have said when they endorsed the Financial CHOICE Act, these reforms would ensure a monetary policy framework that is truly data dependent, consistent and predictable.  The Financial CHOICE Act will help consumers and investors make better decisions in the present and form better expectations about the future and I look forward to its passage.


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